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Foreign Exchange made easyPREPARED BY AMERICAN EXPRESS CROSS BORDER PAYMENTS

SEPTEMBER 2019

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What is Foreign Exchange Risk Management (FX Hedging)?Risk management or FX hedging may be a useful tool for businesses that wish to manage

foreign exchange rate risk.

There are many ways to manage currency risk that don’t need to be complex or difficult.

Rather, they provide an opportunity to help protect the company’s margins and reduce the

risk of currency fluctuations affecting the firm’s financial position.

This risk guide is designed to help businesses understand how easy it is to manage currency

risks using a few simple tools.

Businesses looking to manage their foreign exchange risk may use this guide to understand

their business requirements, review FX hedging products and understand how they may be

used as part of a risk management strategy.

You may benefit from a risk management policy if you said yes to any of these questions.

FX RISK MANAGEMENT CHECKLIST

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ContentsUNDERSTANDING THE IMPACT OF CURRENCY VOLATILITY

A. FALLING DOMESTIC EXCHANGE RATE

B. RISING DOMESTIC EXCHANGE RATE

FX HEDGING BENEFITS

FX HEDGING RISKS

CASE STUDY – IMPORTER

CASE STUDY – EXPORTER

PRODUCTS TO SUPPORT RISK MANAGEMENT

CONTACT US

FX hedging is an important tool for businesses seeking to mitigate risk and support predictable cashflows. It is important to understand the benefits and risks associated with hedging instruments to use them to their greatest benefit.

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Understanding the impact of foreign currency volatility

INTRODUCING THE FORWARD EXCHANGE CONTRACT (FEC), WHICH MAY HELP TO REDUCE RISK ASSOCIATED WITH EXCHANGE RATE FLUCTUATIONS.

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A forward exchange contract (FEC) is an agreement to exchange one currency for another at an agreed point in the future, known as the maturity date.

Foreign exchange forward contracts are normally used to hedge certain known or expected foreign currency cash flows.

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FX hedging case studies

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Additional products to support foreign exchange risk management

TERMS & CONDITIONS Examples used are for illustration purposes only. The information contained in this document has been prepared without taking into account your objectives, financial situation or needs. You should read the Financial Services Guide and PDS and consider the appropriateness of International Payments in relation to your individual requirements.